1996 (4) TMI 143 - AT - Income Tax

Assessing Officer, Assessment Year, Due Time, Immovable Property, Levy Of Penalty, Movable Property, Net Wealth, Other Valuable Article Or Thing, Set On

Summary

Issues Involved:
1. Legitimacy of penalty under section 18(1)(c) of the Wealth-tax Act.
2. Applicability of Explanation 5 to section 18(1)(c) of the Wealth-tax Act.
3. Jurisdiction and authority of the Deputy Commissioner of Wealth-tax (DCWT) in levying penalties exceeding Rs. 10,000.
4. Assessment of whether the assets disclosed were concealed or unaccounted for.

Detailed Analysis:

1. Legitimacy of Penalty under Section 18(1)(c) of the Wealth-tax Act:
The primary issue revolved around whether the penalty imposed on the assessee under section 18(1)(c) of the Wealth-tax Act was justified. The assessee argued that there was no concealment of wealth and that the penalties were not warranted. The Assessing Officer (A.O.) had levied penalties for the assessment years 1984-85, 1985-86, and 1986-87, citing that the assessee had failed to file wealth-tax returns until a search operation revealed concealed wealth.

2. Applicability of Explanation 5 to Section 18(1)(c) of the Wealth-tax Act:
The crux of the matter was whether Explanation 5 to section 18(1)(c) applied to the assessee's case. The Explanation states that if an assessee is found to be the owner of unaccounted assets during a search, they are deemed to have concealed particulars of such assets. The assessee contended that Explanation 5 did not apply because the term "other valuable article or thing" referred only to movable assets, not immovable properties like the ones in question. The Tribunal agreed, citing precedents from the Kerala High Court and the Supreme Court, which clarified that immovable properties do not fall under "other valuable article or thing" as they cannot be seized.

3. Jurisdiction and Authority of the Deputy Commissioner of Wealth-tax (DCWT):
The assessee argued that the DCWT was not empowered to levy penalties exceeding Rs. 10,000 without higher authority approval. The Tribunal clarified that this provision applied only to the Income-tax Officer (ITO) and the Assistant Commissioner of Income-tax (ACIT), not to the DCWT. Therefore, the DCWT was within his rights to levy the penalties without seeking additional approval.

4. Assessment of Whether the Assets Disclosed Were Concealed or Unaccounted For:
The Tribunal examined whether the assets disclosed by the assessee were indeed concealed or unaccounted for. It was found that the assessee had disclosed substantial portions of his wealth, including immovable properties, in the returns filed post-search. The difference between the declared wealth and assessed wealth was attributed to valuation discrepancies, not concealment. The Tribunal noted that the properties were known to the revenue authorities before the search, and the rental income from these properties had been disclosed in previous years.

Conclusion:
The Tribunal concluded that the penalty under section 18(1)(c) was not justified. It held that the immovable properties declared by the assessee did not fall under the term "other valuable article or thing" as used in Explanation 5 to section 18(1)(c). Additionally, the movable assets disclosed were not found unaccounted for during the search. Therefore, the penalties were vacated, and the appeals were allowed in favor of the assessee.